The euro remains under pressure from rising imported energy costs and continued safe-haven support for the dollar. While higher oil and gas prices may lift near-term inflation, they also risk slowing growth, leaving the ECB cautious—likely leaning on stronger communication rather than immediate policy tightening. As a result, any support from ECB rhetoric may limit downside but is unlikely to drive sustained euro strength, especially with Europe more exposed to elevated energy prices, keeping the near-term bias tilted to the downside.

The yen remains well offered with USDJPY still sitting just below the key 160 level that has previously raised intervention concerns. The yen remains under pressure as its safe-haven appeal is diluted by a strong dollar, rising oil prices that hurt Japan’s trade balance, and a persistent yield disadvantage, with the BOJ expected to stay on hold for now. While official warnings may slow the move, they are unlikely to reverse the trend without a broader dollar decline or lower oil prices, leaving the yen vulnerable in the near term despite stretched valuations.

The Australian dollar remains well supported by stronger commodity prices and a relatively hawkish central bank. The RBA raised rates by 25bps to 4.10%, as expected, highlighting persistent inflation and risks tied to Middle East uncertainty, with policymakers signaling inflation could stay elevated and risks skewed to the upside. A narrow 5–4 vote reflects internal division, but the move reinforces a renewed tightening bias and commitment to price stability. While this supports near-term AUD resilience, gains may be limited if a prolonged oil shock weakens global demand.